Summary

• Geopolitical developments in the Middle East over the weekend triggered notable volatility across cryptocurrency markets. However, by midweek, markets rebounded strongly as tensions appeared to ease.

• Bitcoin demonstrated greater resilience compared to Ethereum, though Bitcoin’s dominance experienced a slight decline amid the broad recovery — potentially signaling an early shift toward riskier assets as macroeconomic conditions show signs of improvement.

• The US Dollar Index (DXY) fell to a new 3-year low, influenced in part by President Trump’s continued public criticism of Federal Reserve Chair Jerome Powell’s hesitancy to cut interest rates weighed on sentiment and sparked debate among observers about the Fed’s policy independence.

Market Overview

Crypto markets were shaken over the past weekend by geopolitical tensions. Since then however, the subsequent ceasefire and apparently easing tensions led to rallies in both traditional assets and Bitcoin, with both ending the week in the green following significant volatility for the latter over the weekend. 

Figure 1: Weekly and YTD Performance – Crypto and Global Market Assets

1. Digital Assets

Over the past weekend, amid escalating tensions in the Middle East, Bitcoin declined approximately 8.5%, falling from US$106,000 on Saturday to a low of US$98,000 by Monday. However, Bitcoin subsequently rallied strongly, closing the week above its initial level at US$107,000, successfully reclaiming the key US$100,000 milestone. Ethereum exhibited a similar trajectory but experienced greater downside volatility and a more muted recovery, dropping around 17% from US$2,560 on Saturday to a low of US$2,130 on Monday, and ultimately closing the week below its opening price at US$2,480.

Figure 2: YTD Indexed Performance – Major Digital Assets

Bitcoin continues to demonstrate its resilience as an emerging hedge asset amid geopolitical uncertainty, whereas Ethereum’s performance suggests it remains less established in this role. A study published by BlackRock in September of last year highlights Bitcoin’s consistent strength following comparable geopolitical events, reporting an average return of 37% over the 60 days subsequent to such occurrences.

Figure 3: Bitcoin has historically bounced back strongly following major geopolitical events, on average giving a 37% return 60 days following such major occurrences dating back to 2020

While it remains uncertain whether Bitcoin will sustain its outperformance following this weekend’s events, its strong initial recovery may signal market expectations for a continued upward trend in the largest cryptocurrency. Bitcoin dominance remains elevated at ~66%.

Altcoin Season Yet Remains Elusive

Following Bitcoin's recent all-time high, sustained dominance levels, and the subsequent wealth effect, a common question has emerged: when will the altcoin season begin?

Historically, altcoin seasons typically follow a strong Bitcoin rally, materializing once Bitcoin enters a consolidation or pullback phase. During such periods, capital seeking higher potential returns (alpha) often rotates from the relatively stable, limited-upside Bitcoin to more volatile, smaller-cap altcoins with greater speculative appeal.

However, a key differentiator in the current cycle is the unprecedented proliferation of crypto tokens globally. Even with fresh capital flowing into altcoins, this inflow may be diluted across an oversaturated market of new projects. This could diminish the "rising tide lifts all boats" phenomenon observed in previous bull markets. 

Figure 4: The number of unique tokens on 8 major blockchains has increased nearly tenfold in the last 3 years.

Furthermore, the two preceding major Altcoin cycles were characterised by novel industry themes, encompassing technological or paradigm innovations. For instance, the 2016-2018 cycle was fueled by ICOs, while the 2019-2022 period was driven by advancements like DeFi and Layer 2 solutions.

In the current bull market, many prevailing concepts, such as Meme coins and BitcoinFi or DePIN, are iterations of previously seen trends. While AI is garnering attention, it is not crypto-native and has had limited practical impact on the sector thus far. Consequently, the market since 2023 can still be characterized as policy-driven, with regulatory developments primarily favoring Bitcoin.

Therefore, even if the wealth generated by Bitcoin's performance seeks to spill over into Altcoins, a significant catalyst is likely required. Without such a trigger, achieving capital consensus and concerted market movement may prove challenging. For example, the Meme coin rally last year only temporarily reduced Bitcoin's dominance for a few months.

2. Global Markets

While crypto asset prices experienced the full volatility of events that transpired over the weekend, public equity prices were shielded by the lack of 24/7 trading hours, with the S&P experiencing limited volatility, and ending the week up 2.56%. With such a display of strength despite the possibly still-precarious state of geopolitical affairs, market participants seem to be leaning increasingly bullish overall.

Figure 5: Multi-Asset Performance – Equities, FX, Commodities, Bonds, Volatility

• Equities: 

The S&P 500 (via SPY) remains elevated, ending the week hovering within ~1% of its all-time high. Markets continue to display strength fueled by expectations of a potential Fed rate cut and stabilizing oil prices post-Iran–Israel de-escalation.

• FX: 

The DXY declined by approximately 1.42% after Trump renewed calls to replace Powell, criticizing the Federal Reserve’s ongoing reluctance to cut rates. This rhetoric raised concerns about the future independence of the US central bank, undermining confidence in the stability of the country’s monetary policy.

• Commodities: 

WTI crude returned some of last week’s gains after early-week supply fears subsided, reducing immediate inflationary worries. Gold remained relatively flat.

• Bonds: 

U.S. 10-year Treasury yields fell this week, declining from last week's high of  around 4.44% to close near 4.27%, marking a roughly 17bp drop amid easing geopolitical tensions.

• Volatility: 

The VIX dropped sharply, declining approximately 20% over the past week to 16.8, down from around 21.0 the previous week. This marks its lowest level since February, driven by easing geopolitical tensions — investors are betting the Israel‑Iran ceasefire holds.

3. Intermarket View

Cross-asset correlations remained relatively unchained week-on-week, as BTC continued to hold its slight positive correlation with both the S&P 500 and the DXY, and a slight negative correlation to Gold.

Figure 6: BTC 2M Correlation Matrix (vs ETH, S&P 500, Gold, DXY, US 10Y)

Macro Outlook: Politics at the Fed Continues

Following the Fed’s decision last week to maintain rates at 4.25–4.50%, President Trump criticized Powell’s reluctance to cut rates, suggesting that changes in leadership may come before Powell’s term ends. At the NATO summit in The Hague this week, Trump declared he has “three or four people” under consideration as candidate replacements.

Among the names under speculation are Fed Governor Christopher Waller, former governor Kevin Warsh, National Economic Council director Kevin Hassett, and Treasury Secretary Scott Bessent. The possibility of naming a “shadow” chair — a successor confirmed before Powell’s term ends — has rattled markets, perhaps contributing to the U.S. dollar’s slide to a new three‑year low this week.

In response, Chair Powell held firm during testimony before the House Financial Services Committee, emphasizing a wait‑and‑see posture. He noted the importance of assessing the inflationary impact of Trump’s tariffs and underlined lawmakers’ broad expectation that tighter trade policies may soon influence price levels. Meanwhile, Trump responded with a personal attack on Powell via social media, reiterating demands for faster rate cuts.

Two Trump-appointed policymakers — Michelle Bowman and Christopher Waller — offered a softer tone this week, signaling openness to cutting rates as early as July, citing cooling inflation and emerging labor market pressures. However, Powell and several other Fed officials remain cautious, preferring to await clearer tariff outcomes before committing to a policy shift.

The Week Ahead

Looking ahead, the strong recovery seen after the geopolitically eventful weekend signals an overall optimistic outlook. Even in the face of a still-cautious Fed, market participants seem to be leaning bullish as geopolitical tensions seem to be finding some relief, and other central banks continue to lean dovish.

As global liquidity continues to trend upwards, it remains to be seen if or when altcoins will have their day in the sun, and steal some of the spotlight and dominance away from Bitcoin, which has seemingly begun to cement itself as a mainstream macro hedge asset.

Figure 7: Key Macro and Crypto Events for the Week of June 27–July 3, 2025